Becoming an ROI Builder: Delivering Effective Employee Communication

Kathryn Yates

© 2008 Wiley Periodicals, Inc.Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20184

Effective communication is good forbusiness. While it’s a common-sense

proposition, the cost of organizational com-munication programs gives rise to compli-cated questions. How much difference doeseffective communication with employeesreally make for an employer? And, on apractical level, how can a company commu-nicate more effectively with today’s diverseand increasingly complex workforce?

Over the past six years, Watson WyattWorldwide has surveyed more than 750companies representing more than 12 millionemployees around the world in an effort toanswer those questions. Our aim has been tofind evidence of the best practices in organi-zational communication—those that deliverthe highest return.

Our 2007/2008 Communication Return onInvestment (ROI) Study™, “Secrets of TopPerformers: How Companies with HighlyEffective Employee Communication Differen-tiate Themselves,” confirms the findings ofour earlier studies: communication effective-ness is a leading indicator of financial perfor-mance. Companies with superior employeecommunication provided a 47 percent highertotal return to shareholders over five years(2002–2006) compared with those firms atthe bottom of the communication effective-ness scale.

The study also found that companies thatimplement or improve their communication

practices by one significant deviation canachieve a 15.7 percent increase in market orshareholder value. The bottom line: improv-ing communication effectiveness can trans-late into tens or hundreds of millions ofdollars in added shareholder value forsmall and large companies alike.

How do the most proficient companiescommunicate with employees? Our researchhas found that top-performing companiesexcel in six areas: customer focus, employeeengagement, managerial communication,change management, measuring effective-ness, and employer brand. These conceptsand related practices are described in detailbelow.

When talking to companies about thestudy, we run a small quiz and ask them tospontaneously rate their own performance inthese six areas. Their scores put them intoone of three categories:

1. ROI busters—Companies in which theseactions are rarely used

2. ROI challenged—Companies that applysome of these actions, but not all orperhaps not on a consistent basis

3. ROI builders—Companies that consistentlytake these actions and reap the rewards

To date, we have found only a handful ofcompanies that score themselves in the ROIbuilder category. Most fall somewhere in the

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middle. Although all aspire to reach the highestlevels of communication effectiveness, theirself-evaluations show just how much still canbe done. Information gained from our threecommunication ROI studies about the actionsthat differentiate the top performers from othercompanies gives you valuable insight into howtop performers have differed over time.

CRITICAL COMMUNICATION AREAS

Companies with the highest scores in effec-tive employee communication—and thestrongest financial results—continuouslyfocus their efforts in six important areas.

Customer Focus

The Communication ROI study shows thathigh-effectiveness companies are far morelikely to keep everyone—from managers andsupervisors to technical specialists and front-line employees—focused on the customer.Seventy-six percent of these companies havea program in place to ensure that employeesunderstand how their actions affect cus-

tomers. Only 5 percent of low-effectivenesscompanies report doing this.

A midsize U.S. manufacturing firm keepscustomer focus front and center by providinga one-page weekly briefing that is deliveredto all employees at shift start-up meetings.The front page contains information on keybusiness and plant metrics and the progressof the prior week. It indicates how the vari-ous departments are tracking for the quarterand year to date. Exemplary performance is

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highlighted, as well as the reasons for anynegative results. The back page is devoted tocustomers. The content includes customerquotes about the quality of products andservice—both good and bad—along with neworders, industry news, and other items ofinterest. Employees discuss the results withtheir immediate supervisor and identifychanges that need to be made to improveresults. A program like this one helps ensurethat all members of the organization under-stand how their efforts shape the customerexperience. It helps broaden the answer tothe question, “Why am I doing this?”

Watson Wyatt research indicates a trendtoward improving customer focus. The num-ber of companies reporting that they aredoing a better job of conveying to employeeshow their actions affect the customer hasdoubled since the first study in 2003–2004.Canadian and Asia-Pacific companies areparticularly effective at keeping employeesfocused on customers, while U.S. andEuropean companies fall below the norm.

Employee Engagement

Top performers are four times more likely toreport high levels of employee engagementthan lower-performing companies. Companiesthat have employees with high engagementlevels typically also experience superiorfinancial performance.

In high-effectiveness companies, seniorleaders actively communicate corporate strat-egy, business goals, and the rationale behindmanagement decisions. Personalized communi-cation from top executives strengthens commit-ment and increases line of sight (focus anddirection)—leading to higher levels of employeeengagement and better financial performance.

High-effectiveness companies also recog-nize that effective communication occurs not

Information gained from our three communication ROIstudies about the actions that differentiate the top perform-ers from other companies gives you valuable insight intohow top performers have differed over time.

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only from the top down, but also fromthe bottom up. In comparison with low-effectiveness companies, they are:

• Nearly ten times as likely to giveemployees an opportunity to provideinput into decisions that affect them;

• Nearly seven times as likely to askemployees to share suggestions onprograms and changes; and

• More than twice as likely to ask employeesfor ideas on how to get work done.

These companies use multiple tools forsoliciting employee input—from large-scaleannual and biennial surveys and mini sur-veys to focus groups and skip-level leadershipsessions. The result can be an open dialoguethat promotes trust and confidence, therebystrengthening commitment—one of the twocomponents of engagement.

Asking for input, however, is only the firststep. High-effectiveness companies take thenext step as well, showing that they are listen-ing by acting on the input they receive. Thesecompanies are nearly three times as likely toimplement policy change as a result ofemployee opinion surveys as companies in thelow-effectiveness group. Moreover, these com-panies are far more likely to communicate thechanges they have made as a result of emp-loyee surveys and to measure the impact ofthis communication on employee engagement.

Managerial Communication

The day-to-day contact midlevel managers andfrontline supervisors have with employeesmakes them a credible source of informationabout corporate strategy and business goals.High-effectiveness companies recognize thisfact and leverage these key people to build com-mitment and line of sight among employees.

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They prepare managers and supervisorsfor their role as communicators in a varietyof ways. Training to improve communicationskills is a starting point. These companiesalso package information so that it is easy todeliver, and they involve managers early inthe communication process, giving them timeto absorb the material before passing it alongto their direct reports.

One global technology company takesadvantage of technology in this effort. Adynamic manager’s Web site provides accessto a variety of tools for honing communica-tion skills. The site features articles andvideos in which successful mid- and upper-level managers describe how they tackledtough challenges associated with geographi-cally dispersed audiences, foreign languages,and disparate cultures. These managers sharetheir stories, including the mistakes and mis-steps they made and the lessons learned.

The bottom line is that top-performingcompanies support their managers intheir communication role and reward themfor communicating well. Their efforts in thisarea build enthusiasm and confidence, whichenables managers and supervisors to do abetter job of conveying goals and strategy,addressing employee concerns, and bringingabout behavioral change.

Change Management

Today’s business environment is characterizedby change—mergers and acquisitions, down-sizing, management changes, and restructur-ing, for example. Companies that are good at

The day-to-day contact midlevel managers andfrontline supervisors have with employees makes thema credible source of information about corporate strategyand business goals.

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facilitating these types of change outperformtheir competitors. Effective communicationhelps them successfully navigate change.

High-effectiveness companies are nearlytwice as likely as low-effectiveness compa-nies to implement a communication initiativeto support change. What truly sets themapart, however, is their ability to create com-prehensive programs that leverage managersand supervisors to guide employees throughthe transition.

To meet its transformation goals, oneglobal consumer products company createdcomprehensive training programs, tools, andmaterials to educate managers and the work-force on change management. The companybrought together 35 HR managers fromaround the world for intensive action learn-ing and supported them with a Web sitecontaining the tools and materials they wouldneed to bring the workforce on board. Thecompany’s goal is to create a common frame-work for change, thereby streamlining theprocess and mitigating risk.

Measuring Effectiveness

How do top-performing companies knowwhether their communication programs areworking? The answer is that they measureactions and outcomes. They are far morelikely than low-effectiveness companies toregularly measure the impact of communica-tion on employee engagement, business per-formance, retention of critical talent, andworkforce productivity. They make robustmetrics part of a comprehensive communica-tion plan, and they use multiple tools, including

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surveys, focus groups, corporate scorecards,and communication audits, to assess the per-formance of communication programs.

Peter Vogt, director of internal commu-nications for eBay, is a strong advocate formeasurement. He uses the CommunicationROI study and Hierarchy of Effective Com-munication as a framework for ongoing mea-surement and continuous improvement ofeBay’s internal communication programs.Vogt has challenged his global internal com-munication team to achieve top ratings in allnine practices of the Hierarchy of EffectiveCommunication.

The team measures progress toward thisgoal by regularly deploying in-depth commu-nication effectiveness studies to a samplingof managers and employees worldwide.Team members then compare what theseaudiences say about communication effec-tiveness with their own perceptions. Thiseffort provides insight into where the teamneeds to focus attention to improve thequality of communication.

“The ROI study has been profound in howit has helped eBay to focus its internal com-munication strategy,” Vogt says. “It sets ourtrue North and allows us to focus on whatmatters. It has also been a powerful tool tohelp our executives understand the impact ofinternal communications on the organization.Our 30-plus internal communicators aroundthe world have a common goal of reaching thepinnacle on the ROI pyramid (Hierarchy ofEffective Communication). That’s how impor-tant the ROI study is to our success.”

Employer Brand

Companies spend millions to develop com-pelling brands that build customer loyalty toa product or service. Watson Wyatt researchindicates a growing interest in leveraging this

Vogt has challenged his global internal communicationteam to achieve top ratings in all nine practices of theHierarchy of Effective Communication.

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investment to build loyalty to the employer.The employer brand is the communication ofall elements in the employment deal and thelinking of that deal with business goals. Likethe external brand, it encompasses language,messages, positioning, graphics, packaging,and media.

Not surprisingly, high-effectiveness compa-nies are far more likely to invest time andresources in an employer brand. Fifty-fivepercent of them report having a clear brandcompared with 18 percent of low-effectivenesscompanies.

EFFECTIVE COMMUNICATION GETS RESULTS

Effective employee communication deliverstangible business results. Companies thatinvest in improving employee communicationare likely to see higher financial returns inthe future. In fact, our research over the lastsix years shows that such practices are a lead-ing indicator of future financial success.

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High-effectiveness companies distinguishthemselves by applying these best practi-ces consistently. They also distinguishthemselves by:

• Putting the customer first;• Engaging employees in running the

business;• Improving managerial communication

skills;• Leveraging communication to facilitate

change;• Measuring actions and outcomes; and• Creating a strong employer brand.

Companies that follow the lead of thesetop performers will position themselves tomake substantial gains in communicationeffectiveness, thereby encouraging positivebehaviors that enhance business success.Using this data can help businesses deter-mine how they can enhance their communi-cation programs, better engage employees,and deliver results.

Kathryn Yates, Watson Wyatt’s global practice director for communication consulting, hasmore than 20 years of experience in communication and operations management.Yates isaccomplished in all aspects of employee communication and change management acrossvarious industries and has particular expertise in developing strategies and programs tobuild strong, productive employee-employer relationships. For more information, seewww.watsonwyatt.com. To see the full study results, including Watson Wyatt’s Hierarchyof Effective Communication, and complete the Communication ROI Survey, comparingyour score with scores of other companies in the same industry (at no charge), contactKathryn Yates at Kathryn.Yates@WatsonWyatt.com.

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